I saw an e-mail that alerted netizens why they
should attend this forum. It said, in effect, "The Government has discovered the
Internet. Come find out how they plan to screw it up."

That's consistent with a view of government
that assumes we take the following approach to our jobs: "Step One. If it moves,
regulate it. Step Two. If it doesn't move, kick it. Then, when it does move, regulate
it."

I'm here to tell you, that's not how this Commissioner
thinks -- and neither do my colleagues at the FCC.

The e-mail I received was right about one thing.
The FCC has indeed discovered the Internet. Don't run away in a panic just yet.
When exactly did we discover it?

Was it nine months ago, when we created the
schools and libraries program to enable Internet connectivity in every elementary
and secondary school classroom in America? Was it three years ago, when we began
posting every public FCC release on our Web site? Was it ten years ago, when we
reaffirmed that "enhanced service providers" like CompuServe and Prodigy should
not be subject to per-minute access charges like those the long distance carriers
pay to local telephone companies? No, it was even earlier than that.

It was almost twenty years ago that the FCC
issued its "Computer II" rules, declaring that enhanced service providers would
NOT be regulated like telephone companies. Vint Cerf, one of the founders of the
Internet, tells me that he first testified before the FCC on Internet issues in
1976, over 22 years ago!

Of course, back then there was no commercial
Internet. But there were academic research networks, funded and often operated
by the U.S. government, culminating in the NSFNET backbone that formed the basis
for the Internet we know today. Government supported the growth of nascent technologies
that had not yet demonstrated commercial applicability, and then gracefully stepped
back when the Internet was better able to operate on its own.

Throughout the evolution of the Internet, the
FCC has been careful to tread lightly. We want to promote investment and innovation,
not unnecessary work for government and unnecessary constraints on businesses
or consumers.

Let me start by listing some of the things
we haven't done. We haven't required Internet service providers to pay the per-minute "access charges" that are imposed on long-distance carriers. We haven't subjected
ISPs to any of the other regulatory requirements that the Communications Act places
on carriers -- such as price regulation or tariff filing or universal service
requirements. We haven't barred providers of software for Internet telephony from
selling their products. And we haven't applied any of our rules governing content
in broadcasting to the Internet.

These are all steps that we were asked to take
during the past two years -- sometimes by powerful companies and members of Congress.
But we have remained Internet-friendly.

I don't believe in blind application of old
rules, or in regulation for its own sake. Our responsibility is to promote the
public interest. I take that responsibility very seriously.

In some cases, the best way to promote the
public interest is to act. Congress decided that the only way we would have full
competition in telecommunications was to rewrite the sixty-year old Communications
Act. So they passed the Telecommunications Act of 1996, in order to break down
economic, technical, and regulatory barriers to competition, particularly in the
local telephone market.

And the FCC has been vigorous in making sure
that the market-opening measures are fully implemented. We also have consumer
protection responsibilities in competitive markets, as shown by our efforts to
combat "slamming" and our new requirement that payphone operators disclose their
rates on request, so that callers aren't ambushed by sometimes exorbitant rates.

In other cases, however, we can best promote
the public interest by not acting -- or by deregulating. In our Competitive Carrier
decisions, we have eliminated most of the rules governing domestic long-distance
carriers as the market has grown more competitive. In the Computer III docket,
we recently proposed to streamline the rules governing provision of enhanced services
by local phone companies. And way back in Computer II, we decided that enhanced
services would best grow and thrive if provided on a competitive and unregulated
basis. We not only decided not to regulate enhanced services but also forbade
state regulators from doing so.

The FCC of the late 1970s and early 1980s couldn't
possibly imagine the Internet and the World Wide Web, as we know them today, but
the Commission's decisions of that era reflect considerable foresight. My predecessors
understood that a whole class of computer-based services was emerging and that
these services were fundamentally different from the monopoly-dominated telephone
industry. So they fenced off these new services from regulation.

Today, we are engaged in a broader effort to
implement a pro-competitive and deregulatory communications policy, following
the mandate of Congress in the 1996 Act. I strongly believe that the marketplace,
rather than regulation, is the best mechanism for setting rates and determining
which services should be available. However, we can't simply eliminate all the
rules we have today and hope for competition. As long as the incumbent local exchange
carriers, and particularly the Bell Operating Companies and GTE, retain significant
market power from their control over their bottleneck local loop, we will need
a transitional regime to move from regulation to competition.

Transitions are never easy. And they can be
especially challenging in an industry as dynamic as communications and information,
where the lines between one service and another are constantly blurring. Nowhere
is this fact more evident than with respect to the Internet.

The Internet has been able to grow and develop
outside the existing regulatory structure because the FCC has made conscious decisions
to limit the application of its rules. Over the past several years, however, the
Internet has become more than a mere curiosity. The Internet, and the broader
constellation of data networking technologies it has fostered, are nothing less
than the future of communications.

Where once the "enhanced services" industry
meant a few small companies, today every major player in the communications world
is heavily invested in the Internet -- and even some unfamiliar players are placing
some very large bets. Consider:

AT&T's WorldNet service is one of the largest
Internet service providers in the country, and AT&T recently announced an Internet
telephony service that will compete directly against established long-distance
carriers.

Quest & Level-3 are both making multi-billion
dollar investments in the deployment of new fiber capacity, to offer new Internet
services including voice telephony.

Two weeks ago, all five of the Bell Operating
Companies and GTE joined with Microsoft, Intel, and Compaq in the Universal Digital
Subscriber Line alliance to develop a common standard for technology to make faster
Internet connectivity from the home possible.

The leading cable operators are all beginning
to deploy cable modem services, with over 100,000 subscribers already taking advantage
of this technology.

All of the broadcast networks are making significant
Internet-oriented investments -- from MSNBC to CBS Sportsline. Soon broadcasters
in the major markets will begin broadcasting in digital format, permitting a variety
of data services to be offered in addition to video programming.

In the wireless arena, companies such as Metricom
are taking advantage of unlicensed spectrum to offer wireless Internet access.
And our upcoming LMDS auction will assign a vast swath of spectrum that could
be the foundation for even more exciting services in the next several years.

Satellites are but a step behind. Exciting
projects such as Teledesic, Celestri, and Skybridge promise to provide broadband
communications and Internet connectivity on a global basis.

To a significant extent, these developments
have been nurtured by forward-looking, procompetitive, deregulatory FCC policies.

Looking to the future, I see the FCC having
to grapple with three primary policy challenges regarding the Internet:

First, as the Internet grows and evolves, we
are being asked to review existing regulatory classifications and their attendant
consequences.

Second, we must ensure that homes and businesses
have access to the bandwidth needed to fully exploit the Internet's potential.

Third, we must enable our children to take
full advantage of this extraordinary tool in schools all across the country; and
ensure that the benefits the Internet can bring to rural communities are fully
realized.

Let me elaborate on each of these points.

1. Regulatory Paradigms

Let me give you some concrete examples to demonstrate
why we need to address issues of legal classification. If present trends continue,
data usage of the telecommunications network in the United States will exceed
voice within the next several years. Some studies predict that, in less than a
decade, voice will represent as little as ten percent of total traffic, and most
of that voice traffic will be carried in digitized form indistinguishable from
data signals.

Some people see the blurring of boundaries
between the Internet and traditional telecommunications and conclude that the
best solution is to expand our existing regulatory structure to encompass the
Internet. The people who advocate these positions don't do so because they hate
the Internet. The goals they are trying to achieve are often admirable. The problem
is that these approaches push square pegs into round holes. If we insist on mechanical
application of old rules to new technologies, we will end up with unsatisfactory
results.

Our challenge -- and your challenge -- is to
develop new models that allow us to deregulate rather than regulate, while achieving
the public policy goals of competition and universal service. Congress understands
this task as well. Late last year, it directed the FCC to draft a report analyzing
our implementation of the 1996 Act, and in particular to review the consistency
of our traditional demarcation between "basic" and "enhanced" services with the
new statutory definitions of "telecommunications" and "information services." The Stevens Report, which is due on April 10, gives us an opportunity to explain
how our prior decisions in several different proceedings fit together, and also
to move forward to the next stage of analysis.

We're still early in the process of drafting
the report, and I have not made any decisions about what we should conclude. I
can, however, make a few observations at this point:

I continue to believe we made the right choice
last May in deciding -- once again -- not to subject Internet service providers
to access charges. These charges are currently set well in excess of cost, and
there is no good reason to expand a regime that collects billions of dollars in
implicit subsidies when our clear duty is to reform that regime, squeeze out the
implicit subsidies, and establish new, explicit, competitively neutral means of
universal service support.

Indeed, because we have chosen to rely on market
forces rather than prescription to reduce the gap between access charges and their
underlying economic costs, Internet-based services can serve to accelerate the
reform process.

But in addition to the issue of access charges,
we also must address issues of universal service. Universal service is a societal
goal, now codified in law, and we should ensure that that goal is met in the future
as technology evolves.

All providers of telecommunications services
are now required by statute to contribute to a fund that will ensure the availability
and affordability of telephone service to low-income consumers and consumers in
rural areas, where the costs of constructing transmission facilities is disproportionately
high. This obligation is not shared by enhanced service providers such as those
who provide Internet access (like Erol's) or Internet content (like AOL). Some
suggest this distinction no longer makes sense. Other say it does today but may
not tomorrow, as new services -- such as Internet telephony -- become more pervasive
and less distinguishable from traditional telephone services.

Where does Internet telephony fit? Does the
answer depend on whether the call is terminated on the public switched network?
Should the answer hinge on whether the traffic is voice or data? Should it matter
whether the call is placed with a computer or a telephone?

We are wrestling with these questions right
now. The best answers will be those that are thoughtful, not reflexive; principled,
not based on short-term self-interest; forward-looking, not rooted in preconceived
notions.

First-round comments were filed on the Stevens
Report just last week. I suspect the debate will only intensify as technologies
advance and services proliferate. I invite your participation in this important
discussion.

2. Broad Bandwidth Deployment

The second great challenge for the Internet
is bandwidth. Even though the fiber optic connections that make up the Internet
backbone can transmit hundreds of millions of bits per second, Internet users
typically see only a fraction of that performance. Part of the cause of this "World
Wide Wait" is the backbones themselves, but this is an area in which multiple
providers are making massive investments to meet burgeoning demand.

Although some proceedings before the Commission
raise issues involving Internet backbones, I see greater urgency in the problem
of congestion in the facilities connecting your home to the Internet. Here, I
believe that the competition we are working so hard to promote will help.

Today, the vast majority of residential Internet
users are compelled to connect to the Internet through circuit-switched Plain
Old Telephone Service. They use analog modems that at best deliver 56 kilobits
per second of throughput. But the quality and variety of desirable services increases
tremendously at higher speeds, and many users hunger for access to greater bandwidth.

The recent announcement of the Universal DSL
consortium, as well as other innovative technologies such as Paradyne's Multiple
Virtual Lines, suggest that alternatives to analog loops may soon be deployed.
Also, competing technologies such as cable modems, wireless, and satellite are
becoming increasingly available.

Regulation, whether at the federal or state
level, should not hinder the deployment of these much-needed bandwidth boosters.
And neither should the fear by incumbents that these new options will cannibalize
their existing higher-priced data offerings such as T1 service and ISDN.

The demand for high-speed services clearly
exists, and we need to look at ways to unlock the market forces that will bring
greater bandwidth to residential users. I believe that the single most important
thing we can do to promote bandwidth in the "last mile" to the home is to accelerate
competition among multiple providers. The more the telcos worry about losing the
bandwidth market to the cable companies, and vice versa, the sooner both will
be knocking on your door to offer you the services you want.

So I hope we can enlist your support in breaking
open the local telephone and cable monopolies.

3. Providing Universal Service

The final Internet challenge that I would like
to discuss is in many ways the most important. As a society, we must bring the
benefits of information technology to all Americans, by connecting every classroom
and library in the country to the Internet. This will reduce the danger of social
and economic divisions between information "haves" and information "have-nots." It will also ensure that, in the future, America will have the skilled workers
needed to compete in a global economy that is increasingly dependent on information
technology.

The Internet overcomes geography. It allows
the tiniest rural communities to access the vast stores of knowledge available
on the World Wide Web, and enables the finest medical specialists to serve the
most remote health care facilities.

Congress was right to establish requirements
that will promote telecommunications and information access for schools, libraries,
and rural health care providers. I am proud of the actions the FCC has taken to
implement this mandate, and I look forward to continuing the implementation process.
The schools and libraries corporation recently opened up a Web site to allow schools
to apply for discounts online, making effective use of the very technology we
are seeking to promote throughout the country.

Conclusion

There remain many unresolved details in our
implementation of the 1996 Telecom Act, and the report Congress has requested
will discuss some of them. It is important, though, to step back from time to
time and remember what we are trying to achieve. I think we all agree that the
Internet can be a wonderfully positive force in our society, and throughout the
world. The Internet, however, is only a tool, and it is still subject to both
the laws of physics and the principles of economics.

I'll leave the physics to the engineers in
Silicon Valley building the next generation of routers. The economics, however,
will depend in part on decisions that will be made at the FCC and at state public
utility commissions.

Good policy decisions require good information
and lines of dialogue between these actors, on the one hand, and investors, innovators,
service providers, and end-users, on the other. I welcome your views, and I'm
confident that my colleagues on the FCC do as well. I hope that you will take
advantage of the opportunity.

Thank you.

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